Silicon Laboratories (NASDAQ:SLAB) released another stronger-than-expected quarterly report early Wednesday. It highlighted the fabless semiconductor specialist's enviable position in and tireless efforts to enable our increasingly connected world. If that wasn't enough, Silicon Labs offered guidance for the current quarter that was comfortably ahead of most investors' expectations.

However, shares pulled back more than 5% yesterday, though they're still up more than 40% over the past year. Let's dig deeper to see what drove Silicon Labs' latest quarterly beat and what we can expect looking forward.

Long exposure cityscape image with wireless connected grid.

IMAGE SOURCE: GETTY IMAGES.

Silicon Labs results: The raw numbers

Metric

Q2 2018

Q2 2017

Year-Over-Year Growth

Revenue

$217.1 million

$190.1 million

14.2%

GAAP net income

$14.3 million

$16.6 million

(13.8%)

GAAP diluted earnings per share

$0.32

$0.38

(15.8%)

DATA SOURCE: SILICON LABORATORIES.

What happened with Silicon Labs this quarter?

  • Revenue arrived well above the high end of Silicon Labs' guidance provided in April, which called for a range of $211 million to $217 million.
  • On an adjusted (non-GAAP) basis, which excludes items like acquisition expenses and stock-based compensation, net income was $40.6 million, or $0.92 per share, also above guidance for between $0.81 and $0.87.
  • Internet of Things (IoT) segment revenue grew 19% year over year, to $116 million.
  • Infrastructure revenue increased 35% year over year, to $52 million.
  • Broadcase revenue declined 7%, to $34 million.
  • Access revenue fell 12%, to $15 million.
  • As the company noted in the April report, on April 18, 2018, it closed on its $243 million acquisition of Sigma Designs' Z-Wave business, expanding on its smart-home mesh networking abilities.

What management had to say

Silicon Labs CEO Tyson Tuttle said:

We continue to focus on long-term, high-quality, strategic growth vectors, including IoT, green energy and data communications. The insatiable demand for data will persist, the electrification of the world will accelerate, and the value in connecting 'things' will increase exponentially. The diversity of our business supports strong fundamentals and is driving greater consistency in our results. We are very pleased with what we have accomplished, and even more excited about what lies ahead.

Looking forward

For the current third quarter, Silicon Labs anticipates revenue in the range of $224 million to $230 million, which should translate to adjusted earnings per share between $0.95 and $1.01. While we don't usually lend much credence to Wall Street's demands, consensus estimates called for lower earnings of $0.92 per share on revenue right at the midpoint of Silicon Labs' guidance.

In the end, apart from Silicon Labs' healthy share-price appreciation in the year leading up to this report, there was nothing here that should have merited yesterday's decline. To the contrary, I think long-term investors should be more than pleased with what Silicon Labs had to say, and the stock should ultimately respond in kind.

Steve Symington has no position in any of the stocks mentioned. The Motley Fool recommends Silicon Laboratories. The Motley Fool has a disclosure policy.